Page 4 - NorthAmOil Week 18

NorthAmOil COMMENTARY NorthAmOil
More pain, little gain for super-majors
ExxonMobil has reported its first quarterly loss in 32 years, while Chevron has announced a further cut to its 2020 capex budget
US
WHAT:
ExxonMobil has reported a quarterly loss, and Chevron has said it is cutting its spending further.
WHY:
The oil price collapse is having a significant impact on even the largest producers.
WHAT NEXT:
Both companies are dramatically cutting their shale activity.
OIL prices are up slightly after supply cuts agreed by OPEC+ came into force at the start of this month. However, any gains prices can make are thought to be limited, and producers are brac- ing themselves for more headwinds as spare storage capacity is filled. Against this backdrop, results from the first quarter of 2020 are being announced.
The latest figures from US-based super-ma- jors ExxonMobil and Chevron show that even the largest diversified players are feeling the impact of the crude price collapse, and are pre- paring for further challenges ahead. Indeed, Exx- onMobil has reported its first quarterly loss in 32 years. Chevron, meanwhile, has announced a further cut to its capital expenditure budgets for this year.
Reversal of fortune
ExxonMobil reported a first-quarter loss of $610mn, or $0.14 per share, on a $2.9bn inven- tory write-down. The loss was the super-major’s first since 1988, and marked a drop from a net profit of $2.4bn in the same quarter of 2019. The result illustrates that even super-majors are not immune to the impact of the coronavi- rus (COVID-19) pandemic, which has reduced global fuel demand by around a third as lock- downs of varying severity continue globally.
It is worth noting that ExxonMobil’s adjusted net income came in at $2.3bn, or $0.53 per share, down only slightly year on year from $2.4bn, and up from $1.8bn in the fourth quarter of 2019. And the company’s revenue in the first quarter of 2020, while dropping both y/y and sequentially, was $56.2bn, compared with $63.6bn a year ago and $67.2bn in the fourth quarter.
The oil price collapse thus did not hit Exxon- Mobil’s revenue or adjusted net income as hard as it did some of the company’s rivals, such as Royal Dutch Shell. Nonetheless, the quarterly loss shows how the oil price collapse in March wiped out what would otherwise have been a profit.
ExxonMobil affirmed the capex cut that it announced last month in response to tumbling oil prices. The super-major cut its budget for this year by 30% to $23bn, from $33bn initially, and said it was also lowering its cash operat- ing expenses by 15%. The Permian Basin will account for the largest share of the company’s spending cuts.
ExxonMobil’s CEO, Darren Woods, said on the company’s earnings call that some of its newest and most productive shale wells in the Permian were being shut in because it made sense to preserve that output for a time of higher crude prices.
Both ExxonMobil and Chevron are scaling back operations in the Permian Basin.
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Week 18 07•May•2020